Meet The Expert Demystifying Government Purchases For Small Businesses

Regardless of inflation or the prevailing economic climate, there are some customers for goods and services who are always reliable: government entities. Governments—in levels ranging from federal, state, county and local—spend close to a third of the funds they take in. Glass CEO Paola Santana leads a company that helps small businesses get some of this business, mostly by capitalizing on “micro-purchases,” which are $10,000 and less and don’t require a procurement contract. I talked to her about how to do this kind of business with the government. This conversation has been edited for continuity, brevity and clarity.

An excerpt from this interview appears in Sunday’s Forbes CEO newsletter.

Why should businesses sell their goods to governments?

Santana: Governments are the largest buyers in the world, and the U.S. federal government is the single largest buyer in the world. Governments in general spend about between 20% to 30% of their national GDP to make purchases. That estimates global procurement anywhere between a $13 trillion to $16 trillion market.

In the U.S., we have the SBA. Per SBA’s count, there are about 33 million small businesses in the U.S., that makes about 99% of the fabric of the economy.

When you hear the traditional storytelling, small- and medium-sized businesses never win a [government] contract. When you connect these two pieces of information, what we are literally saying is that the largest buyers in the world, that actually make purchases out of taxes they captured from individuals and businesses, they don’t put that money back right into the foundation of our country’s economy.

That’s 30% of our GDP, not talking to the [businesses that] make our economy be vibrant in a very seamless way. And then you ask questions. Why aren’t they buying from small business more? Then you go one level deeper, and you realize that at the federal, state and local level, each one of these layers has a mandate to [put] between 20% to 30% of their procurement dollars into groups, [including] small businesses. Some of these government agencies are meeting and exceeding those goals, buying from the traditionally same small businesses. In the words of some government procurement leaders, it’s like, ‘We have made some of those small businesses be big businesses.’

What we realized very quickly is that for governments to see more aggressive competition, more diverse product offerings, higher quality products and services delivered with more delightful and better experiences, but also warranties and insurance and all these additional things that our vendors can provide, we need to bring these vendors into the light. Give them visibility. Digitalize them. Understand what they have in real time, what they’re selling in real time, what their pricing is in real time. Then we need to aggregate them.

When we come to small businesses, they’re like, ‘Look, I just want more revenue. I just want to be in business. I have taken this program to win a contract. I have done this webinar. I have even gotten government certification, and none of them has gotten me a government contract.’ What we’re telling small businesses is that a government contract is one in a million. But your chances to winning a small purchase where you don’t need to even compete, government has an ability to come to you [is better]. In many of these businesses, small- and medium-sized that we’re talking about, a $10,000 purchase is something that would keep them in business and keep the lights on for a couple of weeks.

What are some of the difficulties for small businesses that want to work with governments?

They will need to understand where to go to market their goods and services. If you sell fire extinguishers, for example, and you are in the City of New York, you will need to first understand who do you want to sell this to. I’m going to go to my city website. And under the city’s website, there is the system for procurement. Completing that documentation to register there is going to take a couple of weeks. Maybe you will need to also get certified, and that is just to sell to the City of New York. If you wanted to sell to other City of New York departments that do not depend on the centralized City of New York procurement, like New York Port Authority and New York’s housing authority, you will need to go to each one of their websites and register in each one of their procurement systems. This is at the city level. If you want to sell to the Office of General Services of the State of New York, you need to also register at the state level.

When would you have time? [You would have] to have a dedicated government sales department to not just identify all these agencies, but also submit information in the way that they want to receive information. At any given time, there are 90,000 government units in the U.S. making purchases. So how do you know which one has the lowest effort, or what’s the one that you can set the best?

There are no centralized platforms that tell you who, and when, and where everybody’s buying, unless you register on all of them.

How does working with a company like yours ease this process?

Coming to one single place, making sure that that single place is updated and has the best pricing available. Whoever from government that wants to purchase from you, they can find you. They will find you, not because they know you. They will find you because they came to a search bar. It’s a centralized place aggregating all vendors that are not necessarily government vendors, but have all the requirements to be a government vendor at the small level, micro-purchase level.

A lot of these smaller government purchases are made on a more routine basis. There are no contracts in place, but how often do they switch vendors?

I think government entities recognize that their local businesses have a lot to offer, and government, as a steward of the money, would like to distribute this money in the economic fabric of the businesses that they’re supporting and that they want to see thrive. Remember that every business that keeps being in business is money that government doesn’t have to cover—for pieces of employment that they need to pick up. Government purchases are usually tax exempt, but then, having the lights on because of a government purchase, they can sell to someone that does pay taxes. And the more taxes they collect, the more taxes they pay government, and the more money government has to spend. There is an incentive to keep these businesses afloat. What we’re helping governments understand is that keeping them afloat through a grant or a subsidy is not the same as keeping them afloat with business.

We hope that after [a smaller business] captured 10, 200 small payments in credit card transactions then that can come to a big contract. Through transactional education, you have information that you’re learning from actually doing business with government. I think that’s very powerful. It connects the dots of people caring about their cities more, seeing the impact. I respect my government. They are keeping me in business, they’re keeping my people in business. It changes the agency that we think we have, to have our cities and our country being run better because we know we are part of the businesses that are powering [them].

Are governments specifically looking for local small businesses to work with?

Our city customers are looking for serious, specific vendors. They have the list because the vendors have a business license from the city. And they’re like, ‘I’m doing business with less than 1% of my city business license list. How can I do more business with them?’ Imagine the whole logistics and the CO2 emissions reduction and the turnaround time reduction achieved by something that is local: Local demand with local supply.

At the federal level, there are specific mandates. There is a Buy American law that mandates federal government to provide a preference for [items manufactured in the U.S., or made from materials sourced here]. There is a whole veteran-owned business [category]. There’s women-owned small businesses. At the federal, state and local level, I’d say that 95% of government entities at these three levels have a mandate that requires them to spend between 20% to 30% from these groups, and the way they manage and track this is manually. The New York City Comptroller, about two months ago, published this report saying that minority and women business enterprises are not being utilized by New York City agencies. What we’re thinking is, let me give you a larger pool. And by definition, when you bring more players into a table, you will have more diversity.

Governments do not have a mandate to buy the cheapest thing. In the U.S., they have a mandate to buy the best value for taxpayers’ dollars. You can do the right thing from the right groups and track it in one single place, which is one of our value propositions. In one simple screen, you can bring a big box retailer that will have a better price, and will ship from a state next to yours. And you will see a small business that has the same thing that you want, in the quantity that you want, can do same-hour delivery and it’s $1 more. It’s same-hour delivery, free delivery, and it’s a women-owned business. Then you have a veteran-owned business that has $1 less-priced item because they want to get rid of that in their warehouse, and they have already done business with you. Which one of these options do you want? If women-owned business is the goal, you’ll go with the second one. If you are optimizing for budget, I need to stretch it, you will with the first one. If you, like many government entities during the pandemic, don’t have time to wait for shipping, [it could be like laboratories that needed hand sanitizer to open quickly:] It was a local vendor and it was a little bit more expensive, but we could open that laboratory on time.

Once you start getting government business through these purchases, is it likely to stay steady?

Based on the data that we observed from governments making transactions, government is a slower decision maker, but is a decision maker that is deep and that doesn’t churn. So when they make a purchase from you, after they have verified you, see that you are a responsible partner, that you do what you say you were going to do, once you do it once well, our data indicates that government continues using you. Unless they’re like, I have capped the budget that I can spend with one single vendor, so I need to find another one. Because governments know that they are giving monopoly power to every vendor that they choose for a while. This is a good thing about government, as well. They have to rotate and they have to distribute by law.

It can become a very trusted and solid and sustainable source of income, if you manage to pass the initial friction of how and where do I start selling to government. If you get in, you’re in.